America’s banks are missing hundreds of billions of dollars • Hacker News Board

Re: America’s banks are missing hundreds of billions of dollars

#161

Post by thworp » Wed, Mar 22, 2023, 9:14 AM UTC

mo_42 wrote: post #89

nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

> 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. Printing money doesn’t cause inflation necessarily. Your thinking is based on Monetarism, which has been debunked a while ago. In essence, it’s not about the amount of money that is created. It's about the amount of goods we try to consume in relation to the amount of goods produced.

You can only say that once you accept inflation to mean "a single number representing price increases", which is so over-simplified as to be laughable. Not to mention easily manipulated by statistical tricks and more obvious tricks like weighing for "feature increase" or using country-wide medians and not weighing those for population distribution.

If you look at real estate prices vs CPI since MMT really began, real estate grew much faster than CPI, in some cities over twice as fast. That is a direct result of all the excess money that wasn't needed for productive endeavours finding a "safe" place to be parked. Similarly having bonds yield below even the cooked inflation number forces safe traditional investors like pension funds to chase stock market returns which was a large contributor to the gigantic bubble that is now popping.

Redefining inflation to mean consumer price increase was a very sneaky move to be sure. A hundred years ago your statement would have been read as "inflation doesn't cause inflation" since it meant any expansion of the money supply.

Re: America’s banks are missing hundreds of billions of dollars

#162

Post by miles » Wed, Mar 22, 2023, 9:14 AM UTC

csomar wrote: post #53

nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

This is a wrong characterization and makes it look like it's the Fed fault all along. Government bonds still have risks (ie: The government not paying) but more importantly, they are tightly linked to the main interest rate. Their prices can fluctuate significantly and do all the time. Bankers know that. That's kind of the first or second lesson they'd teach you at a basic financial course. Everything is priced in te…

> makes it look like it's the Fed fault all along.

Bingo. https://www.youtube.com/watch?v=d0nERTFo-Sk&t=267s

Re: America’s banks are missing hundreds of billions of dollars

#163

Post by watwut » Wed, Mar 22, 2023, 9:17 AM UTC

nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

> SVB is certainly not blameless here, but the Fed's money printer and the government's wildly excessive stimulus has to be one of the worst policy errors since the 2007/08 financial crisis.

It is other way round. Majority of issue is on SVB side. Feds are not charged with running SVB nor hedging their risks.

Re: America’s banks are missing hundreds of billions of dollars

#164

Post by dageshi » Wed, Mar 22, 2023, 9:17 AM UTC

okeuro49 wrote: post #137

mrbombastic wrote: post #125

Earlier quoted context omitted.

I buy this outline but honest question, was the massive covid stimulus avoidable? I rode a bicycle around NYC during the early days of covid and it was a ghost town, like not a person on the streets in a city of 8 million. On the weekend I took a ride up state for a hike and virtually every business was closed on the way. It seemed inevitable at that point the economic consequences of this were going to be massive an…

Put a shield around the most vulnerable and their carers, until there was a vaccine for them and leave everyone else, especially the young, to continue their lives as normal. Easily said now, however.

Can't see that as ever working.

There'd be no practical way to shield the vulnerable or the carers and beyond that if it's left to run rampant in the wider population eventually the medical system is overwhelmed and collapses.

Re: America’s banks are missing hundreds of billions of dollars

#165

Post by eloff » Wed, Mar 22, 2023, 9:20 AM UTC

csomar wrote: post #53

nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

This is a wrong characterization and makes it look like it's the Fed fault all along. Government bonds still have risks (ie: The government not paying) but more importantly, they are tightly linked to the main interest rate. Their prices can fluctuate significantly and do all the time. Bankers know that. That's kind of the first or second lesson they'd teach you at a basic financial course. Everything is priced in te…

Who is losing their deposits?

Re: America’s banks are missing hundreds of billions of dollars

#166

Post by thworp » Wed, Mar 22, 2023, 9:23 AM UTC

Marazan wrote: post #160

somenameforme wrote: post #102

Earlier quoted context omitted.

Here [1] is a graph of inflation. We've had increasingly accelerating inflation, especially since 1971 [2]. That's the end of Bretton Woods, or the date that the USD became completely unbacked by anything - enabling the freedom to arbitrarily "print" money. In more recent times, even more rapidly accelerating inflation began in July 2020, shortly following the $2.2 trillion CARES act from late March 2020. The "transi…

CPI in 1947 = 21 CPI in 1972 = 42 25 years to double. CPI in 1980 = 84 18 years to double CPI in 1999 = 168 19 years to double 24 years later is still hasn't doubled again. It's hardly a runaway freight train compared to pre 1971 is it?

Yes and now look at indicators that aren't susceptible to manipulation by a government agency and are more favoured assets by the institutions who get the money first. That would be real estate in major markets, stock market price/earnings, luxury goods. Those increased by a substantially larger margin.

Re: America’s banks are missing hundreds of billions of dollars

#167

Post by DSingularity » Wed, Mar 22, 2023, 9:24 AM UTC

csomar wrote: post #53

nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

This is a wrong characterization and makes it look like it's the Fed fault all along. Government bonds still have risks (ie: The government not paying) but more importantly, they are tightly linked to the main interest rate. Their prices can fluctuate significantly and do all the time. Bankers know that. That's kind of the first or second lesson they'd teach you at a basic financial course. Everything is priced in te…

Finally! People calling it what it is. Corruption.

And the domestic angle isn’t even the worst. Breton-Woods put America in a sort of custodianship which they have betrayed. Raising and lowering rates to promote your domestic economy without even considering the global impact is fucked up if you promised the world that your currency can serve as a trusted foundation.

World order is still fluctuating all as a result of these betrayals.

Re: America’s banks are missing hundreds of billions of dollars

#168

Post by parineum » Wed, Mar 22, 2023, 9:25 AM UTC

mo_42 wrote: post #89

nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

> 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. Printing money doesn’t cause inflation necessarily. Your thinking is based on Monetarism, which has been debunked a while ago. In essence, it’s not about the amount of money that is created. It's about the amount of goods we try to consume in relation to the amount of goods produced.

Printing money causing inflation has got to be one of the simplest things in economics to understand. Increase supply of thing, thing becomes worth less. And what's your source on Monetarism being debunked, the people printing currency?

It's pretty strange how, when all the money was being printed, it wasn't that hard to find a plethora of economists warning that it would cause inflation (due to Monetarism principles) and then, now that inflation is rampant, that's not seen as evidence to the theory. Furthermore, change the interest rates to curb inflation is exactly in-line with that theory because higher interest rates cause people to take their inflated currency out of circulation and into savings.

Re: America’s banks are missing hundreds of billions of dollars

#169

Post by Dwolb » Wed, Mar 22, 2023, 9:26 AM UTC

misja111 wrote: post #130

csomar wrote: post #53

Earlier quoted context omitted.

This is a wrong characterization and makes it look like it's the Fed fault all along. Government bonds still have risks (ie: The government not paying) but more importantly, they are tightly linked to the main interest rate. Their prices can fluctuate significantly and do all the time. Bankers know that. That's kind of the first or second lesson they'd teach you at a basic financial course. Everything is priced in te…

> I honestly was thinking we will stay in this zero-rate regime for the next decade or more. I suspect the people at SVB thought in a similar fashion and plan accordingly I have been working in several trading companies, both as trader and in IT, and the first thing they teach you when trading, is that the market always knows better than you. So hedge your risks and don't trust that you have some kind of vision that…

There’s interest rate risk, credit risk, and prepayment risk with the securities they buy.

On a Treasury or guaranteed bond, there is no credit risk.

On a Treasury there is no prepayment risk.

Therefore if you hedge out the interest rate risk, you’re essentially left with 0 risk.

0 risk = 0 or near 0 premium.

e.g. there’s no point in doing the trade if you hedge.

Re: America’s banks are missing hundreds of billions of dollars

#170

Post by geysersam » Wed, Mar 22, 2023, 9:29 AM UTC

nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

> 1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment.

What do you mean by this?

No one forced them to invest in bonds and not hedge against raising interest rates.